Turkey: Port Operation in Turkey: An Overview of Applicable Legislation

Over the last decade, the operation of port facilities has been
among the top investment opportunities in Turkey, attracting the
attention of both local and foreign investors. This comes as no
surprise given the country's long coastlines covering major
international transportation routes. Sixteen ports have been
privatized by the State in the past seventeen years, and
privatization transactions concerning some ports (e.g.
İskenderun, Bandırma and Samsun) have also been
accompanied by transfer operations among private parties
(e.g. Antalya port has been the subject of private
commercial transactional activity since its privatization in
1998).

Transfer operations involving the ports of Turkey exhibit
certain qualities that differentiate them transactionally from
ordinary share or asset transfer deals. This is due mainly to the
fact that the core of these transactions has dealt with the
transfer of rights related to the land upon which the port
facilities were constructed, as well as the transfer of licenses
specific to operating a port in Turkey. These qualities stem from
the fact that Turkey's coastal areas are either state-owned or
subject to the state's right of disposal by virtue of the
Turkish Constitution. Acquiring entities holding port operation
rights cannot thus enjoy ownership rights with respect to the port
itself, and can only benefit from servitude or utilization rights
over the land subject to conditions that are, to a great extent,
pre-defined in the applicable legislation.

The following is a summary of the transfer regime applicable to
the rights and licenses that are required for the operation of a
port business in Turkey.

Transfer of Licenses Specific to a Port Business

Main Licenses

Under the port legislation, in order to operate a port in
Turkey, an entity should either carry a permanent or a temporary
port operation license.1 Temporary port operation
licenses are granted for a period of six to twelve months to cover
the period until the finalization of the port construction. Both
licenses are transferrable to third parties, provided that the
rights related to the land on which the port facilities are located
are also transferred to the party acquiring the operation license.
The Maritime Undersecretariat must be notified of any transfer
involving the port operation license or the temporary port
operation license within one month from finalization of the related
transfer.

Ancillary Licenses

Apart from the main licenses, there are certain ancillary
licenses that may be required in connection with a port business in
Turkey depending on the nature of the activities to be carried out
in the port facility. For example, security certificates must be
obtained if services will be provided to specific types of vessels
in the facility (e.g. vessels carrying cargo weighing 500
gross tons or more). Transfer of the related port business will
require reissuance of the security certificate in favour of the
acquiring party. If the entities are willing to operate a bonded
warehouse in the related facility, this will require acquisition of
a bonded warehouse certificate from the Undersecretariat of
Customs. Such certificate may be transferred to third parties
provided that the approval of the Undersecretariat of Customs is
obtained. On the other hand, pilotage and tugging business permits
that must be obtained in order to provide piloting and tugging
services cannot be transferred to another entity, and no entity
with a foreign shareholder may apply for such a permit.

Transfer of Rights to Land on Which Port Facilities Are
Constructed

Rights related to coastal land

Since coastal land in Turkey is subject to either ownership or
disposal rights of the state, private entities cannot acquire
ownership of the related land, but may only benefit from either
servitude2 or usage rights over it.3 Such
rights may be transferred to third parties as part of a transaction
involving the transfer of the related port business, provided that
the Ministry of Finance's approval for such transfer is
secured. It is noteworthy that even if the entity holding the
related rights remains the same, any transaction concerning the
transfer of 50% or more of the shares of the related entity will
require the approval of the Ministry of Finance. Although the
servitude and usage rights may be transferred to third parties
subject to ministerial approval, such transfer will still require
the acquiring party to execute a new deed, and the Ministry of
Finance may impose new conditions distinct from those set forth in
the original deed.

Rights related to forestry

According to the Forestry Law, entities are entitled to benefit
from forestry for the establishment of facilities providing, among
others, transportation services. Use of the forestland requires the
issuance of a preliminary forestry permit that will be granted for
a term of two years, and which must be replaced with a forestry
permit before its term expires. Such permits are granted by the
Ministry of the Environment and Forestry. The forestry permit may
be transferred to third parties with the approval of the Ministry
of Environment and Forestry, and the acquiring party must execute a
letter of undertaking in that respect. However, the preliminary
forestry permit cannot be transferred.

Expected Transactions

According to the news, the State plans to make additional
investments in some of the ports for which the privatization
process could not be finalized. An additional investment of $300
million will be devoted to İzmir Port, which was acquired
by neither of the two second-highest bidders in the tender launched
in summer 2007. Finalization of most of the investments is planned
in March 2011 increasing the yearly cargo capacity of the port to
2.5 million TEU. Based on the statements of Transportation Minister
Binali Yıldırım, a new tender will be
launched for the privatization of İzmir Port, although the
exact date has not been announced. It is hoped that the second
privatization process for İzmir Port will share the same
destiny as İskenderun Port, the acquisition of which by
the highest bidder could not be finalized as a result of the tender
launched in 2005 due to the court order. However, in the second
tender launched in September 2010, the port has attracted a bid
four times higher than the highest bid made in the first
tender.

Footnotes

1. The requirements to obtain a port operation license as
well as the related procedures are set forth in the Regulation on
the Procedures for Granting Operation Licenses for Coastal
Facilities, published in the Official Gazette dated 18 February
2007 and numbered 26438.

2. The state may grant servitude rights regarding the
land subject to the state's ownership right, whereas
utilization rights may be granted over the land subject to the
disposal right of the state.

3. The issuance of the related rights as well as the
applicable transfer procedures are regulated under the Regulation
on the Utilization of Immovable Property Owned by the Treasury and
Communiqué No. 324 issued by the General Directorate of
National Real Estate of the Ministry of Finance.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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This dispute related to cargo claims brought under three bills of lading. One issue was whether the claims were subject to London arbitration and/or English court proceedings and/or Moroccan court proceedings.

This was an appeal from an arbitration award on a point of construction in relation to the wording of an addendum to a charterparty.

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